Question

Consider a loan for $100,000 to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 8% compounded annually. What is the remaining balance of the loan after 2 years?

A. 64,005

B. 74,954

C. 64,545

D. 25,046

E. 49,909

Help please :)

Answer #1

STep 1 Calculate the Annual payment required i.e. EMI

PV = Annual payment x cumulative disounting facto @8% for 5 years

100000 = AP x 3.99271

AP = 25045.6457

Step 2 draw Amortization table:

Opening
Balalnce |
Annual Payment |
Interest @ 8% on Opening
balalnce |
Principal portionAnnual payment - Interest Portion |
Closing balanceOpening - principal portion |

100000.0000 | 25045.6457 | 8000.0000 | 17045.6457 | 82954.3543 |

82954.3543 | 25045.6457 | 6636.3483 | 18409.2974 | 64545.0569 |

64545.0569 | 25045.6457 | 5163.6046 | 19882.0411 | 44663.0158 |

44663.0158 | 25045.6457 | 3573.0413 | 21472.6044 | 23190.4114 |

23190.4114 | 25045.6457 | 1855.2343 | 23190.4114 | 0.0000 |

As it is clear from above option C is correct

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Repayment
Ending
Year
Balance
Payment
Interest
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1
$
$
$
$
$
2
$
$
$
$
$
3
$
$
$
$
$

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Balance
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Interest
Year
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X
Y
Z
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Beginning
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Ending
Year
Balance
Payment
Interest
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1
$
$
$
$
$
2
$
$
$
$
$
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